Thomas Furniture Company concludes that production scheduling can be improved by developing an accurate method of predicting quarterly sales. The company analyst, Mr. Estes, decides to investigate the relationship between housing construction permits and furniture sales in the Springfield area. Estes feels that permits will lead sales by one or two quarters. In addition, he wonders if furniture sales are seasonal. Estes decides to consider another independent variable:

The data are given in Table P-14.

a. Develop a regression model that uses housing construction permits as the predictor variable.
b. Test for autocorrelation in this model.
c. Develop a regression model that uses both permits and the seasonal dummy as predictor variables.
d. Is there a significant seasonal pattern in these data? (Test at the .05 level.)
e. Is there an autocorrelation problem with the multiple regression model developed in part c? If so, how might it be corrected?
f. Using the model from part a, forecast Thomas Furniture Company sales for the four quarters of 2007.

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Oiffirst-or second-quarter sales I if third-or fourth-quarter sales TABLE P-14 Sales (1,000s Permits Sales (1,000s) Permits Year Quarter 20023 20031 Year Quarter 72 31 19 14 75 2005 1 19 120 I50 660 270 200 280 800 120 35 400 200 75 120 270 155 1 20061 16 32 10 17 10 2004 12 2007 21